Why Warrior Met Coal Outshines Alpha Met in a Volatile Steel Market

The steelmaking coal sector faces headwinds, but not all players are equally positioned to weather the storm. While both Warrior Met Coal (NYSE: HCC) and Alpha Metallurgical Resources (NYSE: AMR) trade with “Hold” ratings, a deeper dive into their cost structures, operational resilience, and strategic initiatives reveals a clear favorite: Warrior Met Coal. Its lower cash costs, disciplined capital allocation, and long-term growth catalysts make it a safer, higher-return bet compared to Alpha Met, which struggles with margin pressures and execution risks.

Cost Discipline: The Foundation of Resilience

Warrior Met's Q1 2025 results underscore its focus on cost control. Its cash cost of sales fell to $112.35 per ton—a 16% decline year-over-year—despite a 40% drop in steelmaking coal prices. This compares unfavorably to Alpha Met, where metallurgical coal costs rose to $110.34 per ton in Q1 2025 due to severe winter weather disruptions. Even excluding one-time factors, Warrior's costs remain structurally lower: its adjusted EBITDA margin of 13.2% in Q1 2025, though down from prior years, outperforms Alpha Met's dismal 0.8% margin.

The contrast is stark: Warrior's cost discipline allows it to preserve cash margins even in weak markets, while Alpha Met's higher variable costs and operational volatility expose it to margin compression. For investors, this means Warrior is better insulated against pricing declines, a critical advantage as global steel demand (and coal pricing) remains uncertain.

Production Growth vs. Contractions

Warrior's Blue Creek project is a game-changer. The mine contributed 251,000 tons in Q1 2025 and is on track to produce 1.0 million tons annually by late 2025, with full-scale production expected by mid-2026. This growth will lower unit costs further and diversify Warrior's product mix into high-volatility metallurgical coal—a sought-after input for high-quality steel.

Alpha Met, meanwhile, has slashed its 2025 metallurgical coal shipment guidance by 5.5% to 13.8–14.8 million tons, citing weak demand and pricing. Worse, its thermal coal segment faces headwinds as utilities pivot to renewables. Its lone bright spot, the Kingston Wildcat mine, remains years from meaningful production and requires steady capital spending at a time when cash flows are strained.

Liquidity and Capital Structure: A Safety Net

Warrior's liquidity is a fortress: $616.6 million in cash and equivalents as of March 2025, plus $153.7 million in debt (well within covenants). Even after $79.3 million in Q1 capital expenditures, its dividend (cut to $0.08 per share) remains sustainable.

Alpha Met's liquidity, while adequate, is less robust. Its $485.8 million in cash and ABL capacity (upgraded to $225 million) are sufficient for near-term needs but leave little room for error. With $18–28 million in projected idle costs and margin pressures, its debt-free balance sheet offers no leverage to fund growth—a critical disadvantage if coal prices rebound.

Risk Exposure: Tariffs, Weather, and Execution

Warrior faces risks, too. Retaliatory tariffs on U.S. exports and inflationary pressures could disrupt cash flows. Yet its focus on domestic sales (which account for 50% of metallurgical contracts) and long-term pricing commitments (averaging $133/ton for 2025) mitigate these risks.

Alpha Met's risks are more existential. Its reliance on export-oriented pricing (48% of metallurgical sales tied to Australian indices) leaves it vulnerable to oversupply and geopolitical shocks. Weather disruptions in early 2025 caused a $2 million per month hit to costs, a recurring threat in its Appalachian operations.

Investment Thesis: Prioritize Warrior's Defensiveness

Warrior Met Coal is the clear choice for investors seeking long-term compounding returns in this sector. Its lower costs, Blue Creek-driven growth, and liquidity buffer position it to outperform in both stable and volatile markets. Even with a “Hold” rating, its 12% dividend yield (post-cut) and potential to rebound if coal prices stabilize make it a defensive play.

Alpha Met, while cheaper on a price-to-book basis, is a high-risk gamble. Its margin fragility, exposure to weather, and lack of near-term growth catalysts mean investors should avoid it unless they're betting on a rapid steel demand rebound—a scenario that's far from certain.

Final Call

Buy Warrior Met Coal (HCC) for its operational resilience and value at current prices. Avoid Alpha Met (AMR) unless you're willing to bet on a steel sector turnaround. In a market where volatility reigns, Warrior's margin of safety and growth prospects make it the safer, smarter choice.

Data as of July 7, 2025. Past performance does not guarantee future results.